First Merchants Corp (FRME) 2008 Q4 法說會逐字稿

Hello and welcome to the First Merchants Corporation fourth quarter 2008 earnings conference call. All participants will be in listen-only mode. There will be an opportunity for you to ask questions at the end of today's presentation. (Operator Instructions) During this call, Management may make forward-looking statements about the Company's relative business outlook. These forward-looking statements and all other statements made during the call that do not concern historical facts are subject to risks and uncertainties that may materially affect actual results. Specific forward-looking statements include but are not limited to any indications regarding the financial services industry, the economy and future growth of the balance sheet or income statement. (Operator Instructions) Please note this conference is being recorded.

Now, I would like to turn the conference over to Chief Executive Officer, Michael Rechin. Mr. Rechin?

Thank you, Ryan, good afternoon. I appreciate the interest of our listeners today and welcome to our earnings conference call for the 12 months ending December 31st, 2008. Joining me today are Mark Hardwick, our Chief Financial Officer, Dave Spade, Chief Credit Officer, and John Martin, Deputy Chief Credit Officer.

I'll lead off by highlighting our 2008 results and then adding comments on our highest priority objectives for the coming year. Mark Hardwick will follow me with some additional commentary on our financial results, Dave Spade and John conclude with details on our portfolio composition and its credit condition. We're all available for question-and-answer dialogue after our prepared remarks.

In the release that was let go before lunchtime today, you would have seen that First Merchants Corporation earned $1.14 per share in 2008 and $0.01 per share in the fourth quarter. The annual earnings compare to $1.73 earned in 2007 and $0.51 earned in last year's fourth quarter. At the end of the earnings release, I referred to five specific priorities for 2009 and beyond. I'd like to address each of those separately in my thoughts before giving way to Mark, Dave and John, who will add greater detail around the financial results capital position and credit quality.

I think I'll begin with our acquisition of Lincoln Bank Corp. closed at year end. We successfully closed the transaction on December 31st and are moving towards an April integration of their systems in the field and back office. The core processing integration will be coincident with the signage and name changes for the Lincoln franchise. Our branding work and additional customer contact efforts have also been initiated. Our work in the adoption of common processes has also begun in areas such as credit policy, credit adjudication and portfolio management. At this point, we've identified and acted on the vast majority of the expense savings we identified in our original due diligence and in working with Lincoln's management prior to closing. Several of the senior managers at Lincoln have assumed the significant roles with First Merchants and our combination efforts in the field are being led by Mike Stewart, our Chief Banking Officer. I'll offer additional thoughts on Lincoln later in the call.

A second key objective for the Company is improving our credit quality metrics. While our portfolio has deteriorated in a direction consistent with the Midwestern marketplace, the growth trend in nonperforming assets is exaggerated by the December inclusion of Lincoln's balance sheet. We're aggressively managing the portfolio and will continue to shift resources within the Company to segregate the management of problem assets from the origination and servicing of our core borrowers and depositors. While we have very limited clarity on the timing of the turnaround in the economy, we continue to have an extremely granular portfolio as it relates to individual exposure and loan types. Dave and John will provide more metrics into our credit condition later on.

Expense management has received the appropriate attention in our 2009 planning. We've implemented a salary freeze for all participants in our Senior Management incentive plan, and have since the Lincoln acquisition, we'll been reducing our work force in overall numbers through a combination of attrition and elimination of positions of redundancy throughout First Merchants. In following with the charter consolidations of mid-2007, we're continuing with structural realignments that are producing the required high service levels we need, yet are providing greater expense efficiency which should be very evident in our 2009 results.

A strength for us in 2008 and an objective for maintenance is our high margin level that we achieved. Despite the series of rate declines we experienced, our net interest margin peaked at 3.88% in the fourth quarter and was 3.79% for the month of December, despite the fed funds move to 50 basis points mid-month. Several factors play into our net interest margin strength, and Mark will cover some of those items in his remarks.

In short, I would add that we've been extremely proactive in the use of rate floors on prime-based loans and getting paid for the use of our balance sheet. In addition, we've been proactive in the pricing of all liability categories, recognizing the market share and market power we enjoy in many of our key markets without sacrificing our deposit volume goals. Mark, I'm going ask you now if you'd take over to discuss our liquidity and capital positions as well as additional detail on full year earnings.

Thank you, Mike. I would first like to thank the accounting team of First Merchants and Lincoln for working such long hours over the last month to complete the consolidation of the year end financial statement to include the completion of the actual on-site field work by BKD, our outside auditing firm. So everyone on the call today, thanks for your interest in First Merchants Corporation. As Mike mentioned, First Merchants Corporation reported earlier today its fourth quarter and 2008 net income and EPS results. And the earnings per share for the year totaled $1.14, a decline of $0.59 from 2007's total of $1.73. Net income for the year totaled $20.6 million compared to the 2007 total of $31.6 million. The quarter is difficult to discern given the complexities of closing the Lincoln acquisition on December 31st of 2008 and several extraordinary noninterest income items and noninterest expense items which I'll discuss in a few minutes.

Total assets reached a record $4.8 billion at quarter end, an increase of $1 billion from the December 31, 2007 total of $3.8 billion. Of the $1 billion increase, the completion of the merger with Lincoln accounted for $876 million. Loans and investments, the Corporation's primary earning assets, totaled $4.2 billion, an increase of $876 million or 26% over the prior year. Loans accounted for $846 million of the increase as investment securities increased by $31 million. And of the $876 million loan increase, Lincoln accounted for $637 million in loans and $122 million of investments. And these numbers are all included in our press release.

The Corporation's allowance for loan losses as a percent of total loans increased from 98 basis points to 131 basis points during the year, a $20.7 million increase. Provision expense exceeded net charge-offs by $12 million and Lincoln added $8.7 million to the Corporation's allowance at year end. The increased allowance to loan losses is comprised of $2.4 million in increases to our specific impairment reserves, $4.1 million of increases in general historical -- in the general historical loss component and 4. -- $14.2 million of increases in the environmental factors. None of the increases in the specific reserves were related to Lincoln as all recognized impairments were charged down to the fair value prior to closing the transaction. Nonperforming loans totaled $88 million, including the addition of $34 million from Lincoln. Dave Spade will provide the color regarding the loan portfolio in a moment.

The Corporation's total deposits increased during the year by $875 million as Lincoln Bank accounted for $655 million of the increase. Total borrowings increased by $50 million including $137 million increase from Lincoln. As of December 31st, 2008 the Corporation's tangible common equity ratio totaled 5.01%. The tier 1 leverage ratio totaled 8.76%. Tier 1 risk-based capital totaled 7.31%. And total risk-based capital was 8.-- or 9.84%. The decrease in the Corporation's capital ratios for the year is primarily attributable to two factors: The first is a decline in other comprehensive income of $12.8 million resulting from investment security write-downs under FAS 115, totaling $1.3 million and a decline in pension plan asset valuations totaling $11.5 million during the year. The second factor is a combination of items all related to the Lincoln Bank Corp. acquisition. The Corporation used cash of $16.8 million as part of the $77.3 million purchase price, resulting in increased common equity of $60.1 million to acquire an $876 million institution. Additionally, as a result of the acquisition, First Merchants added $32.3 million of intangibles to its books directly attributable to Lincoln Bank.

The two primary -- the two primary financial criteria that First Merchants uses in an acquisition are no tangible capital dilution and new EPS dilution. In this transaction, the credit and interest rate environments moved dramatically from the date of announcement to the date of close resulting in a transaction that was dilutive to tangible equity, yet positively accretive to EPS. Let me detail how this happened. At the date of our announcement on September 3rd, First Merchants was anticipating approximately $16 million of intangibles comprised of $12 million in core deposit intangible and a $4 million market premium. A very thorough pre-closing due diligence effort and a declining credit environment resulted in additional marks to Lincoln's assets of $4 million after tax and the interest rate environment caused purchased accounting adjustments required by FASB totaling $12.4 million.

Let me give an example of a purchase accounting adjustment. Assume a $10 million advance has a stated rate of 5% and matures in three years. The current market is 2% for a three-year advance. FASB requires the premium or discount to be recorded on the balance sheet. Let's assume that this mark is $1 million. So we're required to record an additional liability of $1 million on our balance sheet and the offsetting entry of $1 million debit to goodwill. Then we will amortize the purchase accounting credit for, in this case, a thorough home loan bank advance into our income statement over the remaining three-year life of the investment, or of the borrowing. The purchase accounting adjustments, again, in this transaction totaled $11.6 million, reducing the total risk-based capital ratio by 30 basis points and tangible equity by 25 basis points. Or said another way, the PA's were dilutive to tangible equity by 25 basis points. The amortization will positively impact earnings per share next year and will cause the transaction to exceed our original net income expectations creating EPS accretion.

Now back to capital. On November 12th, 2008, the Corporation applied for participation in the US Department of Treasury's capital purchase program in an amount totaling $116 million. The application has been approved by the Corporation's primary regulator and was forwarded to the Treasury Department on January the 16th, 2008. We are at this time still waiting for the -- for approval at the Treasury level, but we have received approval by our primary regulator. The addition of $116 million in preferred stock would improve the Corporation's total risk-based capital ratio to 12.8%, comfortably above the well-capitalized guidelines. The Corporation recognizes the importance of continuing First Merchants' history of being well capitalized and the Treasury's CPP program is of great interest to us.

Now let's discuss year-to-date net income. Net interest margin, as Mike mentioned, expanded 29 basis points from 355 in 2007 to 384 in 2008. As a result, net interest income improved by $16.3 million. Net interest margin remained strong during the fourth quarter and even through the second half of December as the Federal Reserve Board lowered the target Fed funds rate. Aggressive deposit pricing and the use of interest rate floors on over $360 million of the Corporation's primary index loans helped preserve the Corporation's net interest margin. Provision expense totaled $27.6 million in 2008, an increase of $19.1 million over the prior year. And the increase in the provision expense exceeded the margin expansion or the net interest income expansion by $2.9 million. Total noninterest income decreased $4.2 million in '08, and there are several extraordinary items that caused the decrease.

Income from changes in cash-- in the cash surrender value of bank owned life insurance, or BOLI, declined by $3.9 million during the year. And in the fourth quarter, the Corporation recorded a loss of $2.1 million due to declines in the market value below the stable value ap. BOLI losses are not tax deductible. Therefore, the loss is not tax deductible, which resulted in a year-over-year decline in net income due just to the BOLI portfolio of $3.9 million. On December the 18th, Management changed the investment elections under the separate account policy to a more conservative investment strategy. The Corporation also lost $1.5 million on federal home loan mortgage corporation preferred stock during the third quarter, and the corporation at this time -- or has no additional equity exposure at this time to the Federal Home Loan Bank or Fannie Mae. And on a very positive note, has no exposure to private label mortgage-backed investment securities.

Additionally, the Corporation elected to expense $1.2 million of its $15.5 million original book balance trust preferred pool of investment exposure. The loss is attributable to one specific investment with a book balance of $2 million, and it's the Trapeza IV pool. The only pool deemed to be other than temporarily impaired as of year end. The remaining $13.5 million of exposure to trust-preferred pools is diversified among eight FTN pretzel investments.

Total noninterest expense for the year increased by $7.2 million, the increase is more than First Merchants is comfortable with, and Mike Rechin mentioned-- as Michael Rechin mentioned, and we've begun taking actions on several cost reduction initiatives in 2009. Salary and benefit expense increased $4.5 million during the year. And other expense items worth noting include an increase of $1.8 million in other real estate expense and an $860,000 increase in professional services related to loan workout. First Merchants also sold the assets of Indiana Title Insurance Company in the fourth quarter resulting in a $560,000 loss for the month of December-- in the month of December. Dave will now cover the details of our loan portfolio and our -- and our NPLs.

Thank you, Mark. As Mike and Mark mentioned, First Merchants Corporation has continued to see challenges presented by a deteriorating economic environment at state, local and national levels. These weaknesses have manifested themselves in higher levels of nonperforming assets and loan delinquencies in some areas of the Corporation. The credit department's special assets officers, local bankers and others continue to manage through problem loan identification, aggressive collections, legal actions and the marketing of other real estate owned. I will discuss the trends and changes to our loan portfolios during the fourth quarter. I will also highlight how we plan to continue to manage our risk assets as the economic issues continue in this country.

As of December 31st, 2008, First Merchants Corporation saw the nonperforming assets plus 90-day delinquencies increase from $63 million to $73 million for the existing bank franchise. With the addition of Lincoln Bank assets to the December 31st totals, those NPAs increased slightly more than $112 million. Total nonperforming assets plus 90-day past-due accounts represent 2.34% of actual assets and 2.83% of total loans and other real estate owned at the year end. The top-five nonperforming relationships including other real estate owned represented 24.5% of total nonperforming assets at the end of the quarter. All of these five assets were identified during previous quarters and specific action plans have been developed to either move the assets out of the bank or to sell the other real estate owned. With the inclusion of nonperforming assets from Lincoln Bank at year end, little nonperforming assets moved from $63 million on September 30th, 2008 to the $112 million total I spoke about on December 31st, 2008. Of that 49 increase -- $49 million increase, $10 million of that was attributed to First Merchants Corporation while $39 million was allocated to Lincoln Bank assets.

Total other real estate owned and repossessed assets at FMC decreased by $1.5 million during the quarter while the same time Lincoln asset categories provided an additional $3 million for a combined balance of $18.5 million on December 31st, 2008. With the inclusion of the Lincoln assets, the total 90-day and over past-due loans decreased from 26 basis points in the third quarter of total loans to 16 basis points of total loans or $6 million at year end. Compared to the total at the end of the third quarter, the overall 90-day and over past-due loan category improved by $2 million.

Annualized net charge-offs to total loans per FMC were 52 basis points for 2008 compared to 24 basis points for the year ending December 31st, 2007. Losses recognized across all loan categories including commercial and industrial loans, commercial real estate and the retail lending areas. For the entire year, net charge-offs were recorded at $15.6 million compared to the net charge-offs experienced during the previous year of $6.8 million. Further breakout of losses included $1.4 million in net write-downs of construction and land development, while all other commercial real estate losses were an additional $1.4 million. The commercial and industrial loan category was the largest write-off area at $5.8 million in losses. Net retail lending charge-offs were broken down by residential loans at $4.3 million and net consumer charge-offs of $2.0 million for the year. These performance numbers are indicative of the challenges faced by First Merchants Corporation during this current economic cycle.

Residential loan delinquencies were closed end to one-to-four family, closed end to one-to-four family with junior liens and revolving home equity loans on December 31st, 2008 or 2.1% compared to 2.39% during the previous quarter. During the same period last year, residential delinquencies over 30 days past due were also reported at 2.39%. As presented in the latest statistical release provided by the Federal Reserve, delinquencies for residential mortgages provided by all banks in the United States stood at 5.08%, and that was during the third quarter. This number is slightly higher than one year ago when the Federal Reserve bank reported delinquencies for residential mortgage loans at 2.72% nationally.

Total FMC commercial real estate delinquencies by call code were reported at 5.6% at year end, including the Lincoln Bank assets. As of December 31st, 2008, combined FMC and Lincoln Bank commercial and industrial delinquencies were reported at $25.7 million or 2.47% of total commercial loans outstanding.

Commercial construction and land development loans including Lincoln Bank were $252 million at the end of the year compared to $165 million at the end of the third quarter. Increases in this category came from $16.6 million from the existing FMC balances while Lincoln balances added $66.9 million. Construction and land development loans represent 60.5% of total FMC capital. Total construction and land development loans represent 6.8% of total loans as compared to 5.4% of total loans at the end of the third quarter. We continue to closely monitor this portfolio for existing projects as well as being very selective with additional exposure to the industry.

Moving on, looking at multi-family loans. They were reported at $128.9 million on December 31st, representing 31.4% of tier 1 capital plus the allowance and 3.5% of total loans. Investment commercial real estate, that is nonowner occupied, had total balances of $497.5 billion or 121% of tier 1 capital plus the allowance. That commercial loan category grew by an addition of the loans from Lincoln in the amount of $109 million at year end, and that represented 22% growth in nonowner occupied investment real estate. Overall, the total commercial real estate including construction and land development, nonowner occupied and multi-family represent 23.6% of total loans at FMC after the addition of the Lincoln assets.

The consumer monitoring collection and charge-off processes continue to improve in each of the banks. Specifically, more standardized asset disposition, collection and charge-off processes have helped to reduce the time that the repossessed and other assets are held prior to sale. Additionally, consumer charge-offs are now charged off at 90 days past due for non real estate secured consumer loans, while consumer real estate secured assets follow charge-down procedures that are in line with expectation of foreclosure and recovery. As we continue to experience a rise in our nonperforming portfolio, we are in process of augmenting our special assets team through additions of people from both inside and outside of the Company. The existing team continues to meet frequently and work with those borrowers experiencing challenges and, where necessary, working to move those assets out of the bank. I'll now turn it back over to Mike Rechin for additional comments.

Thank you, Dave. I think as you heard Mark's comment, today's credit risk management challenge extends beyond the loan portfolio. During 2008, I believe we dealt aggressively with the risk elements in our investment and BOLI portfolios. We're fortunate to have a diversification of investment classes that should limit additional loss exposure subject in large part to the future direction of the financial sector's strength.

I'd like to return for a minute to our Lincoln acquisition briefly. Lincoln has a long history with Indianapolis customers, particularly on the growing south and west quadrants of the city itself, well-placed physical franchise in growing communities and a market recognized leadership team. Our combined teams covering Indianapolis markets will be focused on improving credit quality and growing our deposit base under the First Merchants name. There's an availability of talent in the market and then our Company will allow us to diversify Lincoln's portfolio mix from it's current real estate orientation to a more balanced coverage of the central Indiana marketplace.

I guess I'd say in summary I like our market positions. Significant market share and several substantial, mature Indiana markets, markets like Muncie, Indiana, Lafayette and Anderson, coupled with expanding market share in Columbus, Ohio, and Indianapolis, Indiana. Behind Chicago, these are the two best growth markets in the Midwest. We know our earnings potential, we've seen it. We also understand the climate at hand and the growth that it calls for, the tempered growth, and the work that needs to be done.

The five priorities I listed in my earlier remarks will be our guiding posts to include items that we can control such as our expense levels, the execution on the Lincoln integration, and, in some aspects of the net interest margin. Dave described the resources that will be attributed to improving our credit quality, both on the front door as we greet new customers and continue to lend patiently, as well as handling the portfolio at hand. And Mark and our financial team will work as they have been on ensuring they have the liquidity to take advantage of the opportunities as the present themselves. So at this point, after a more detailed call than we have normally provided relative to the specifics of the income and expenses, our team would be open for questions, Ryan.

(Operator Instructions) Our first question comes from Brian Hagler of Kennedy Capital.

Hey, good afternoon.

Good afternoon, Brian.

Mark, I think you said that your tangible common equity ratio was 5%. Just wanted to get I guess your thoughts on if you guys have laid out kind of a target range for that in the past, and if you feel like it'll organically grow this year?

At the Board level we've said nothing below 5% with an eye towards growing the tangible capital ratio to 6%. And we've been doing that pretty steadily over the last couple of years. The-- as I mentioned, the purchase accounting adjustments that took 25 basis points or so out of the tangible capital ratio were a little unexpected. And yet they accrete into income over the next several years. So we'll get a nice add back of that amount. At this stage, we're continuing to just evaluate our overall capital position, the impact of the TARP and the CPP program, which doesn't have a tangible common equity component and continuing to assess our competitors and the need to potentially have some kind of an increase in the common equity position. But at this stage, our Board and our Management team have not elected to move forward with any type of capital rate. The earnings beyond dividends should add in the range of $10 million to our equity ratio in the coming year. So we're continuing to monitor just earnings over dividends, the impact of OCI and how the purchase accounting adjustments will accrete back into capital.

Okay. Appreciate that. And what was tangible book value at the end of the year?

I don't have it. I think it was about $10.80. I think that's right. I think it was right about $11, Mark.

Okay. And then finally, you mentioned in the credit commentary that consumer loan charge are charged-off at 90 days past due, was that a change this quarter? And if so, did that lead to maybe kind of a, I want to say double accounting, but a little more charge-offs in that category than normal, or have you always had that policy?

We got a little more aggressive with respect to that. We had not always recognized charge-offs on auto loans, for example, at the 90-day status and we decided to do that. So that stepped up our write-offs more than in the past. And then we used the 180-day issues with respect to junior liens and first mortgage loans to write those and aggressively market those down with appraisal information.

So you kind of went to a standard 90 days on all those categories now?

Right. And those really got written into our overall policy so that we're consistent.

Okay. Thanks a lot, guys.

Thanks, Brian.

Our next question comes from Brian Martin of Howe Barnes.

Hi, guys.

Good afternoon, Brian.

Hey guys, can you guys just give a little color just given the capital as far as the growth goes for '09 as far as, I mean it sounds like it's less growth and maybe just more remixing of the portfolio, or just kind of what, what your expectations are there? You've been growing the C&I book pretty nicely over the past 12, 15 months and kind of wondering what to expect as you look to '09?

Brian, it's Mike. I'll answer that for you. Our orientation toward being a middle market, lower middle market C&I lender will continue not only in our core franchise, but it's part of the orientation we're going to try and bring to Lincoln's franchise as well. Similar to the pruning of our loan portfolio in indirects we'll take that same discipline to the Lincoln portfolio as well. And the originate and sell mentality around residential mortgages will also be applied there, which is a policy and a practice that Lincoln has adopted in great regard already. So I think you'll see flattish looking residential mortgage components, a shrinking indirect and installment component, and then a growing C&I piece perhaps less than what you've seen in the past which has been a high single to low double-digit number, probably into the middle single-digits. A function both of what we see as loan demand and just the standards that we feel like are appropriate for underwriting in 2009.

Okay. All right. Thanks. And then the -- on the margin, I know you guys have talked about getting the TARP proceeds. I mean if you do get this, can you just talk a little bit about what, what impact that has on the margin? I guess based on what you-- what your expectations to do with the TARP capital?

Yeah. I can speak to that, Brian. We've -- we have shared a couple of different models with our Board. And our expectation really is to over time, if we were to bring $116 million in, we'd like to move $116 million into the loan portfolio. And look at another $116 million or so in the investment portfolio. Obviously the investment purchase happens pretty quickly. And then you would kind of let the bond portfolio run off into the loan portfolio to create some of the growth. But the EPS impact-- the margin impact on the bottom line of net interest income is just a little over $6 million of positive margin because the cost of carry of the CPP program and its dividend, or the $5.8 million in dividends, is below the line. So as we've assessed the cost of the warrants, the limited amount of margin that we can create with -- without excessively leveraging the capital, it ends up being somewhere in the $0.08 to $0.12 range as far as EPS dilution. So at this stage, given current environment, capital positions, we're looking at doing something modest with the dollars. But obviously, it allows us to continue moving forward with some of our growth initiatives in the loan portfolio.

Okay. All right. And Mike, you mentioned a little bit -- just I mean, the expenses were a little bit higher than I guess I was looking for this quarter. And you talked about some-- Mark talked a little about that in the call, I guess the-- as far as the future evidence of some of the realignments you talked about, Mike, in the quarter, I guess can you give some thought as far as what I guess quantifying that as far as what you expect on the expense side going forward-- where we might see some? I mean I guess I'm assuming that the OREO and legal type of expenses in this environment will remain high. So I guess just wondering what, what piece you could control to maybe bring a little bit lower?

Well, it -- I mean, the absolute most controllable is direct salary expense. And again, kind of two pieces on that, Brian. The first one is our evaluation right from the date of the definitive agreement of the talent mix and needs in the Lincoln franchise. And those decision have been made. And so we'll hit all of our targets for -- relative to expense management at Lincoln. But the point of my comments extended well beyond that both in regard to what we think is the behavior in 2009 around our highest compensated bankers, about 90 participants in the plan that I referenced, and then a very modest growth in the balance of our employee mix. But I think it's safe to say that it would be a 1% kind of or less core run rate at the salary level for existing First Merchants employees. And then the other area that we've just put some bright lights on is what I consider to be some discretionary expenses around travel, prudent entertainment and a bunch of lower dollar items that aggregate into a sizable number.

Okay. Okay, and then maybe Dave, I -- maybe I just missed this, just trying to write everything down the -- you talked about the increase at Lincoln this quarter on the nonperforming side. I guess the, the other piece seemed to be the $10 million or $11 million at the lead bank. And it didn't sound like any of the top five credits changed. But that additional add of $10 million in the quarter at the lead bank. What, what was driving that? And I guess was it a series of smaller credits, was it one large credit, and just by category, what -- is it more C&I, was it commercial real estate?

I think with that, it was probably a mix of C&I and commercial real estate. Mostly land development where we recognize that the slowdown and the issues regarding the sellout of lots really impacted the credit so we did move them to nonaccrual.

Okay. Okay. That's all I had. Thanks, guys.

Thank you.

That does conclude our Q&A session. I would now like it turn the call over to our conductors for any closing remarks.

I would just echo my appreciation for the attentions to our detail of our results. We feel fortunate to have put together four quarters in 2008 that were profitable, but clearly the second half of the year and the climate we are operating in began to wear on our portfolio, both in the loans and in the securities. I hope our efforts described today speak to our 2009 treatment of such. And we look forward to talking to you again in the April timeframe around our first quarter's results. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.